Profound Reliance Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri

Case Significance

Illustrates the taxpayer's burden in an error-or-mistake claim under section 131 of the Income Tax Act 1967 and the deference accorded to the Special Commissioners of Income Tax, the taxpayer's appeal for the year of assessment 2011 being dismissed.

This High Court decision at Kuala Lumpur, sitting in the Appeals and Special Powers Division, concerns the taxpayer's appeal against part of a decision of the Special Commissioners of Income Tax (SCIT), heard together with the Director General of Inland Revenue's appeal against the same decision. The taxpayer, Profound Reliance Sdn Bhd, appealed against that part of the SCIT panel's decision by which the panel had, unanimously and on its own motion, denied the taxpayer's claim for the year of assessment 2011 in respect of a supposed error or mistake in its tax submission, its claim having been advanced under section 131 of the Income Tax Act 1967. Section 131 allows a taxpayer who alleges that an assessment was excessive by reason of an error or mistake in a return to seek relief, but the relief is hedged by conditions, including a time limit and the exclusion of relief where the return was made in accordance with the law or practice generally prevailing when it was made. The taxpayer contended that the SCIT had been wrong to deny relief for the year of assessment 2011. The court considered whether the SCIT had erred in its treatment of the section 131 claim for that year and whether the taxpayer had established the error or mistake and brought itself within the statutory conditions. It concluded that the taxpayer's appeal should not succeed, and, consistently with its decision to allow the Director General's connected appeal, it dismissed the taxpayer's appeal with costs, awarding global costs of RM10,000 to the Director General. The judgment is a useful illustration of the taxpayer's burden in an error-or-mistake claim under section 131 of the Income Tax Act 1967 and of the deference accorded to the Special Commissioners on matters of tax and its enforcement. The judgment also underscores the deference the High Court accords to the Special Commissioners on matters of tax and its enforcement, intervening only where their decision is shown to be wrong in law or unsupported by the evidence, and it confirms that a taxpayer seeking error-or-mistake relief bears the burden of establishing both the error and its effect on the assessment.